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After months of fretting over an impending recession, economists are noting the economy’s resilience and eyeing a potential “soft landing” from the current rate-hiking cycle.

“Maybe this holy grail of a soft landing is no longer mythical,” said Jean-François Perrault, chief economist with Scotiabank. “We might achieve that.”

Speaking alongside other chief economists Friday morning at the Economic Club of Canada’s annual outlook event in Toronto, Perrault said economists had underestimated the resilience of the economy and households.

“A whole lot of crap happened last year,” he said, from inflation surprises to Russia’s invasion of Ukraine. Yet, his growth forecast of 3.7% for the Canadian economy will be close to the actual figure when it comes in, he said.

Douglas Porter, chief economist with BMO Financial Group, said the economy ended the year with a lot more momentum than anyone expected. There are unique aspects to the economy arising from the pandemic, including excess savings and pent-up demand, that make it harder to forecast, he said.

While noting the economy’s resilience, however, Porter said that every time in the post-war era that the Federal Reserve and the Bank of Canada have raised interest rates by four percentage points or more, a downturn has followed.

“You often hear don’t fight the Fed,” he said. “This is one case where you really cannot fight the Fed.”

Getting inflation down from 5% or 6% to central banks’ target ranges will be challenging and likely require “at least a modest downturn,” he said.

RBC chief economist Craig Wright said he was standing by his early call for a recession this year, pointing to deglobalization and the end of “free money” with ultra-low interest rates.

“There’s just too many forces to prevent a recession,” he said.

However, Wright was optimistic about the trajectory of inflation. He said he expects the inflation rate to be back within the Bank of Canada’s 1% to 3% target range by the end of this year.

The Canadian economy added 104,000 jobs in December, surprising economists and raising expectations for higher interest rates to cool the labour market.

The economists on the panel were divided over whether the Bank of Canada would pause or raise rates by another 25 basis points at the Jan. 25 meeting.

Beata Caranci, chief economist with TD Bank Group, said the decision may be more about messaging. More important than whether rates rise again would be the release the same day of the monetary policy report, which will lay out the bank’s short-term agenda.

“From a strategic perspective, they may want to do the 25 basis points for the sole purpose of reminding markets of their credibility — of making sure there’s no complacency or too much of a … relief rally,” Caranci said.

When markets closed Thursday, the S&P 500 was up 3.74% for the year following the release of U.S. CPI figures, while the S&P TSX Composite was 4.26% higher.

“The market certainly believes we’re in for a Goldilocks scenario where inflation does come down without an outright recession,” Porter said.

While there are positive signs on inflation and in markets, the chief economists said there’s still a lot of risk and uncertainty.

Porter pointed to geopolitical risks, including friction with China, Iran and North Korea, in addition to the Russia-Ukraine war. “To me, those are much more serious concerns than the economic challenges facing us,” he said.

Perrault pointed to the possibility of more surprises on the inflation front. While there’s “a whole bunch of evidence” from the past few months suggesting that inflation is doing what economists expected, he said the pandemic has revealed that economists’ understanding of inflation is not nearly as advanced as previously thought.

“I worry that something’s going to happen on the inflation side that is inconsistent with how we think about inflation,” he said. And that could mean higher inflation, higher rates and a deeper recession.

Economists with Desjardins said in a report released Friday that growth is expected to contract in at least two quarters this year, with debt becoming a bigger issue for Canadian households.

The Canadian Federation for Independent Business, meanwhile, said in a report on Thursday that a recession is still avoidable.